Fortinet® (NASDAQ: FTNT), a global leader in high performance cyber security solutions, today announced financial results for the first quarter ended March 31, 2015.

"Fortinet had an exceptionally strong first quarter that reflects our ability to continue to execute in a strong security market and once again exceed our expectations across all key metrics," said Ken Xie, founder, chairman and chief executive officer. "Our first quarter billings growth was the highest since becoming a public company over five years ago and is further evidence that our investment strategy is paying off. During the first quarter, we grew the number of large deals closed against competitors and added over 8,000 customers to our base of more than 200,000, which already include most of the Fortune Global 100. Looking forward, we feel Fortinet's scale is starting to provide more of a competitive differentiator on
multiple fronts, and helps us provide the best solution to our customers. And Fortinet remains well positioned to maintain momentum and grow market share globally given our best-in-class integrated end-to-end network security platform, which provides superior protection against advanced cyber threats."

Financial Highlights for the First Quarter of 2015

Billings1: Total billings were $254.3 million for the first quarter of 2015, an increase of 36% compared to $187.6 million in the same quarter of 2014.

Revenue: Total revenue was $212.9 million for the first quarter of 2015, an increase of 26% compared to $168.9 million in the same quarter of 2014. Within total revenue, product revenue was $97.5 million, an increase of 27% compared to the same quarter of 2014. Services and other revenue was $115.4 million, an increase of 25% compared to the same quarter of 2014.

Deferred Revenue: Total deferred revenue was $600.2 million as of March 31, 2015, an increase of $41.4 million from $558.8 million as of December 31, 2014.

Cash and Cash Flow2: As of March 31, 2015, cash, cash equivalents and investments were $1.07 billion, compared to $991.7 million as of December 31, 2014. In the first quarter of 2015, cash flow from operations was $64.6 million and free cash flow1
was $59.7 million.

GAAP Operating Income:
GAAP operating income was $0.9 million for the first quarter of 2015, representing a GAAP operating margin of 0.4%. GAAP operating income was $12.8 million for the same quarter of 2014, representing a GAAP operating margin of 8%.

GAAP Net Income and Diluted Net Income Per Share: GAAP net income was $1.6 million for the first quarter of 2015, compared to GAAP net income of $8.4 million for the same quarter of 2014. GAAP diluted net income per share was $0.01 for the first quarter of 2015, compared to $0.05 for the same quarter of 2014.

Non-GAAPOperating Income1:
Non-GAAP operating income was $20.1 million for the first quarter of 2015, representing a non-GAAP operating margin of 9%. Non-GAAP operating income was $26.3 million for the same quarter of 2014, representing a non-GAAP operating margin of 16%.

Non-GAAPNet Income and Diluted Net Income Per Share1: Non-GAAP net income was $13.5 million for the first quarter of 2015, compared to non-GAAP net income of $18.2 million for the same quarter of 2014. Non-GAAP diluted net income per share was $0.08 for the first quarter of 2015, compared to $0.11 for the same quarter of 2014.

1A reconciliation of GAAP to non-GAAP financial measures has been provided in the financial statement tables included in this press release. An explanation of these measures is also included below under the heading "Non-GAAP Financial Measures."

2During the first quarter of 2015, there were no shares repurchased under our share repurchase program.

Conference Call DetailsFortinet will host a conference call today, April 20, 2015, at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time) to discuss its financial results. To access this call, dial (877) 303-6913 (domestic) or (224) 357-2188 (international) with conference ID # 22278922. A live webcast of the conference call and supplemental slides will be accessible from the Investor Relations page of Fortinet's website at http://investor.fortinet.com and a replay will be archived and accessible at http://investor.fortinet.com/events.cfm. A replay of this conference call can also be accessed through April 27, 2015, by dialing (855) 859-2056 (domestic) or (404) 537-3406 (international) with conference ID# 22278922.

Following Fortinet's financial results conference call, the Company will host an additional question-and-answer session at 3:30 p.m. Pacific Time (6:30 p.m. Eastern Time) to provide an opportunity for financial analysts and investors to ask more detailed product and financial questions. To access this call, dial (877) 303-6913 (domestic) or (224) 357-2188 (international) with conference ID # 22281145. This follow-up call will be webcast live and accessible at http://investor.fortinet.com, and a replay will be archived and available after the call at http://investor.fortinet.com/events.cfm. A replay of this conference call will also be available through April 27, 2015 by dialing (855) 859-2056 (domestic) or (404) 537-3406 (international) with conference ID # 22281145.

About Fortinet (www.fortinet.com)Fortinet(NASDAQ: FTNT) protects the most valuable assets of some of the largest enterprise, service provider and government organizations across the globe. The company's fast, secure and global cyber security solutions provide broad, high-performance protection against dynamic security threats while simplifying the IT infrastructure. They are strengthened by the industry's highest level of threat research, intelligence and analytics. Unlike pure-play network security providers, Fortinet can solve organizations' most important security challenges, whether in networked, application or
mobile environments -- be it virtualized/cloud or physical. More than 200,000 customers worldwide, including some of the largest and most complex organizations, trust Fortinet to protect their brands. Learn more at www.fortinet.com, the Fortinet Blog or FortiGuard Labs.

Forward-looking StatementsThis press release contains forward-looking statements that involve risks and uncertainties. These forward-looking statements include statements regarding the momentum in our business, potential growth of our business, market share gains and product performance. Although we attempt to be accurate in making forward-looking statements, it is possible that future circumstances might differ from the assumptions on which such statements are based. Important factors that could cause results to differ materially from the statements herein include the following: general economic risks; increasing competitiveness in the security market; the dynamic nature of the security market; specific economic risks in different geographies, and among different customer segments; changes in foreign currency exchange rates; uncertainty
regarding increased business and renewals from existing customers; uncertainties around continued success in sales growth and market share gains; failure to convert sales pipeline into final sales; risks associated with successful implementation of multiple integrated software products and other product functionality risks; execution risks around new product development and introductions and innovation; product defects; litigation and disputes and the potential cost, distraction and damage to sales and reputation caused thereby; market acceptance of new products and services; the ability to attract and retain personnel; changes in strategy; risks associated with management of growth; lengthy sales and implementation cycles, particularly in larger organizations; technological changes that make our products and services less competitive; risks associated with the adoption of, and demand
for, our model in general and by specific customer segments; competition and pricing pressure; and the other risk factors set forth from time to time in our most recent Annual Report on Form 10-K, our most recent Quarterly Report on Form 10-Q and our other filings with the SEC, copies of which are available free of charge at the SEC's website at www.sec.gov or upon request from our investor relations department. All forward-looking statements herein reflect our opinions only as of the date of this release, and we undertake no obligation, and expressly disclaim any obligation, to update forward-looking statements herein in light of new information or future events.

Non-GAAP Financial MeasuresWe have provided in this release financial information that has not been prepared in accordance with Generally Accepted Accounting Principles (GAAP). These non-GAAP financial measures are not based on any standardized methodology prescribed by GAAP and are not necessarily comparable to similar measures presented by other companies. We use these non-GAAP financial measures internally in analyzing our financial results and believe they are useful to investors, as a supplement to GAAP measures, in evaluating our ongoing operational performance. We believe that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing our financial results with other companies in our industry, many of which present similar
non-GAAP financial measures to investors.

Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures below. As previously mentioned, a reconciliation of our non-GAAP financial measures to their most directly comparable GAAP measures has been provided in the financial statement tables included below in this press release.

Billings. We define billings as revenue recognized plus the change in deferred revenue from the beginning to the end of the period less any deferred revenue balances acquired from business combination(s) during the period. We consider billings to be a useful metric for management and investors because billings drive deferred revenue, which is an important indicator of the health and visibility of our business, and historically the recognition of previously deferred revenue represents a majority of the quarterly revenue that we recognize. There are a number of limitations related to the use of billings versus revenue calculated in accordance with GAAP. First, billings include amounts that have not yet been recognized as revenue. Second, we may calculate billings in a manner that is different from peer companies that report similar financial measures. Management
compensates for these limitations by providing specific information regarding GAAP revenue and evaluating billings together with revenues calculated in accordance with GAAP.

Free cash flow. We define free cash flow as net cash provided by operating activities minus capital expenditures. We consider free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that, after the acquisition of property and equipment, can be used for strategic opportunities, including investing in our business, making strategic acquisitions, repurchasing outstanding common stock, and strengthening the balance sheet. Analysis of free cash flow facilitates management's comparisons of our operating results to competitors' operating results. A limitation of using free cash flow versus the GAAP measure of net cash provided by operating activities as a means for evaluating liquidity is that free cash flow does not represent the total increase or decrease in the cash, cash
equivalents and investments balance for the period because free cash flow excludes cash used for capital expenditures and also excludes cash provided by or used for other investing and financing activities. Management compensates for this limitation by providing information about our capital expenditures and other investing and financing activities on the face of the cash flow statement and under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources" in our most recent Quarterly Report on Form 10-Q and Annual Report on Form 10-K.

Non-GAAP operating income and operating margin. We define non-GAAP operating income as operating income plus stock-based compensation expense, acquisition-related charges, including amortization, impairments and other purchase accounting adjustments, and, when applicable, any other significant non-recurring items in a given quarter. Non-GAAP operating margin is defined as non-GAAP operating income divided by revenue. We consider these non-GAAP financial measures to be useful metrics for management and investors because they exclude the effect of stock-based compensation expense, acquisition-related charges, including amortization, impairments and other purchase accounting adjustments, and, when applicable, any other significant non-recurring items so that our management and investors can compare our recurring core business operating results over multiple periods. There
are a number of limitations related to the use of non-GAAP operating income versus operating income calculated in accordance with GAAP. First, non-GAAP operating income excludes stock-based compensation expense and acquisition-related charges and any other significant non-recurring items. Stock-based compensation expense has been and will continue to be, for the foreseeable future, a significant recurring expense in our business. Second, stock-based compensation expense is an important part of our employees' compensation and impacts their performance. Third, the components of the costs that we exclude in our calculation of non-GAAP operating income may differ from the components that other companies exclude when they report their non-GAAP results of operations. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from non-GAAP
operating income and evaluating non-GAAP operating income together with operating income calculated in accordance with GAAP.

Non-GAAP net income and diluted net income per share. We define non-GAAP net income as net income plus stock-based compensation expense, acquisition-related charges, including amortization, impairments and other purchase accounting adjustments, and, when applicable, any other significant non-recurring items, adjusted for the impact of the tax adjustment, if any, required to achieve the effective tax rate on a non-GAAP basis, which could differ from the GAAP effective tax rate. We define non-GAAP diluted net income per share as non-GAAP net income divided by the weighted-average diluted shares outstanding. We consider these non-GAAP financial measures to be useful metrics for management and investors for the same reasons that we use non-GAAP operating income and non-GAAP operating margin. However, in order to provide a complete picture of our recurring core business
operating results, we include in non-GAAP net income and non-GAAP diluted net income per share, the tax adjustment required to achieve the effective tax rate on a non-GAAP basis, which could differ from the GAAP tax rate. We believe the effective tax rates we used are reasonable estimates of normalized tax rates for our current and prior fiscal years under our global operating structure. The same limitations described above regarding our use of non-GAAP operating income and non-GAAP operating margin apply to our use of non-GAAP net income and non-GAAP diluted net income per share. We compensate for these limitations by providing specific information regarding the GAAP amounts excluded from non-GAAP net income and non-GAAP diluted net income per share and evaluating non-GAAP net income and non-GAAP diluted net income per share together with net income and diluted net income per share
calculated in accordance with GAAP.

FORTINET, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands)

March 31, 2015

December 31, 2014

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$

386,352

$

283,254

Short-term investments

417,605

436,766

Accounts receivable - Net

161,854

184,741

Inventory

72,060

69,477

Deferred tax assets

41,175

41,484

Prepaid expenses and other current assets

32,757

31,143

Total current assets

1,111,803

1,046,865

LONG-TERM INVESTMENTS

268,608

271,724

PROPERTY AND EQUIPMENT - Net

63,487

58,919

DEFERRED TAX ASSETS

38,998

31,080

GOODWILL

2,824

2,824

OTHER INTANGIBLE ASSETS - Net

2,559

2,832

OTHER ASSETS

10,024

10,530

TOTAL ASSETS

$

1,498,303

$

1,424,774

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:

Accounts payable

$

40,164

$

49,947

Accrued liabilities

25,873

29,016

Accrued payroll and compensation

42,727

45,875

Income taxes payable

3,343

2,689

Deferred revenue

406,526

368,929

Total current liabilities

518,633

496,456

DEFERRED REVENUE

193,645

189,828

INCOME TAXES PAYABLE

50,280

45,139

OTHER LIABILITIES

15,998

17,385

Total liabilities

778,556

748,808

STOCKHOLDERS' EQUITY:

Common stock

169

166

Additional paid-in capital

604,147

562,504

Accumulated other comprehensive income (loss)

226

(349

)

Retained earnings

115,205

113,645

Total stockholders' equity

719,747

675,966

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

1,498,303

$

1,424,774

FORTINET, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands, except per share amounts)

Three Months Ended

March 31, 2015

March 31, 2014

REVENUE:

Product

$

97,509

$

76,765

Services and other

115,377

92,184

Total revenue

212,886

168,949

COST OF REVENUE:

Product 1

41,368

32,139

Services and other 1

22,234

18,604

Total cost of revenue

63,602

50,743

GROSS PROFIT:

Product

56,141

44,626

Services and other

93,143

73,580

Total gross profit

149,284

118,206

OPERATING EXPENSES:

Research and development 1

35,816

29,055

Sales and marketing 1

100,609

67,326

General and administrative 1

11,961

9,010

Total operating expenses

148,386

105,391

OPERATING INCOME

898

12,815

INTEREST INCOME

1,422

1,333

OTHER EXPENSE - Net

(677

)

(389

)

INCOME BEFORE INCOME TAXES

1,643

13,759

PROVISION FOR INCOME TAXES

83

5,366

NET INCOME

$

1,560

$

8,393

Net income per share:

Basic

$

0.01

$

0.05

Diluted

$

0.01

$

0.05

Weighted-average shares outstanding:

Basic

168,077

162,391

Diluted

173,720

168,114

1 Includes stock-based compensation expense as follows:

Cost of product revenue

$

140

$

113

Cost of services and other revenue

1,632

1,329

Research and development

5,157

3,882

Sales and marketing

9,307

5,746

General and administrative

2,686

1,860

$

18,922

$

12,930

FORTINET, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited, in thousands)

Three Months Ended

March 31, 2015

March 31, 2014

Net income

$

1,560

$

8,393

Other comprehensive income (loss) - net of taxes:

Foreign currency translation losses

-

(1,017

)

Unrealized gains on investments

885

2

Tax provision related to items of other comprehensive income

(310

)

-

Other comprehensive income (loss) - net of taxes

575

(1,015

)

Comprehensive income

$

2,135

$

7,378

FORTINET, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

Three Months Ended

March 31, 2015

March 31, 2014

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income

$

1,560

$

8,393

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

6,353

4,422

Amortization of investment premiums

1,938

2,513

Stock-based compensation

18,880

12,930

Excess tax benefit from stock-based compensation

-

(579

)

Other non-cash items - net

159

(67

)

Changes in operating assets and liabilities:

Accounts receivable - Net

23,621

19,119

Inventory

(6,296

)

3,326

Deferred tax assets

(7,918

)

24

Prepaid expenses and other current assets

(1,203

)

(287

)

Other assets

507

45

Accounts payable

(11,305

)

(6,042

)

Accrued liabilities

(3,450

)

(170

)

Other liabilities

(1,569

)

16,155

Accrued payroll and compensation

(3,149

)

1,071

Deferred revenue

40,696

18,469

Income taxes payable

5,795

(18,420

)

Net cash provided by operating activities

64,619

60,902

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of investments

(120,991

)

(120,590

)

Sales of investments

6,679

10,920

Maturities of investments

135,363

118,641

Purchases of property and equipment

(4,927

)

(11,318

)

Payments made in connection with business acquisitions - net of cash acquired

-

(17

)

Net cash provided by (used in) investing activities

16,124

(2,364

)

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from issuance of common stock

28,955

14,471

Taxes paid related to net share settlement of equity awards

(6,600

)

(3,633

)

Excess tax benefit from stock-based compensation

-

579

Repurchase and retirement of common stock

-

(12,305

)

Net cash provided by (used in) financing activities

22,355

(888

)

EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS

-

(555

)

NET INCREASE IN CASH AND CASH EQUIVALENTS

103,098

57,095

CASH AND CASH EQUIVALENTS - Beginning of period

283,254

115,873

CASH AND CASH EQUIVALENTS - End of period

$

386,352

$

172,968

Reconciliations of non-GAAP results of operations measures to the nearest comparable GAAP measures